Press Release

 

For Immediate Release

                                                          Contact:  D. Linn Wiley

                                                                          President and CEO

                                                                          (909) 980-4030

 

 

 

CVB Financial Corp. Reports Third Quarter Earnings

 

Ontario, CA, October 20, 2004-CVB Financial Corp. (NASDAQ:CVBF) and its subsidiary, Citizens Business Bank, announced record results for the third quarter of 2004.  This included record deposits, record loans, record assets and record earnings.  It was the strongest third quarter in the history of the Company.

 

Net Income

CVB Financial Corp. reported net income of $17.1 million for the third quarter ending September 30, 2004.  This represents an increase of $3.6 million, or 26.46%, when compared with the $13.5 million in net income reported for the third quarter of 2003.  Diluted earnings per share were $0.35 for the third quarter of 2004.  This is up $0.07, or 25.00%, when compared with earnings per share of $0.28 for the third quarter of 2003. 

 

Net income for the third quarter of 2004 produced a return on beginning equity of 24.19%, a return on average equity of 23.34% and a return on average assets of 1.57%.  The efficiency ratio for the third quarter was 45.80%, and operating costs as a percentage of average assets were 2.00%. 

 

Net income before gains and losses from securities and the sale of real estate was $16.8 million for the third quarter of 2004. This was up $5.5 million, or 49.29%, from net income before gains and losses from securities and the sale of real estate of $11.2 million for the third quarter of 2003. These results produced a return on beginning equity of 23.79%, a return on average equity of 22.96%, and a return on average assets of 1.54%. The corresponding efficiency ratio for the third quarter of 2004 was 46.07%, and operating costs as a percentage of average assets was 2.00%.

 

Net income for the nine months ending September 30, 2004 was $44.6 million.  This represents an increase of $5.9 million, or 15.16%, when compared with net earnings of $38.7 million for the same period of 2003.  Diluted earnings per share were $0.91.  This was up $0.12, or 15.19%, from diluted earnings per share of $0.79 for the same period last year. 

 

Net income for the nine months ending September 30, 2004 produced a return on beginning equity of 20.78%, a return on average equity of 20.10% and a return on average assets of 1.45%.  The efficiency ratio for the nine-month period was 48.77%, and operating expenses as a percentage of average assets were 2.08%.

 

Net income before gains and losses from securities and the sale of real estate was $45.0 million for the nine months ending September 30, 2004. This represents an increase of  $9.0 million, or 25.09%, when compared to net earnings before gains and losses from securities and the sale of real estate of $36.0 million for the same nine months period in 2003. These results produced a return on beginning equity of 20.98%, a return on average equity of 20.30%, and a return on average assets of 1.46%. The related efficiency ratio for the nine months period was 48.61%, and operating costs as a percentage of average assets were 2.08%.

 

The Company sold one of its buildings in Pasadena during the third quarter of 2004. This building houses the Pasadena Business Financial Center and the Wealth Management Group. The Company has agreed to lease back the Pasadena Business Financial Center space for five years and the Wealth Management Group space for two years.

 

The sale of the building resulted in a gross gain of $2.1 million of which $1.7 million is required to be deferred and amortized as an adjustment to rental expense over the life of the leases. The Company recognized $419,000 of the gain during the third quarter.

 

Net Interest Income and Net Interest Margin

Net interest income (before provision for credit losses) totaled $39.9 million for the third quarter of 2004. This represented an increase of $8.5 million, or 27.17%, over the net interest income of $31.4 million for the third quarter of 2003. These increases resulted from an $11.7 million increase in interest income, offset by a $3.1 million increase in interest expense.

 

Net interest income (before provision for credit losses) totaled $111.4 million for the nine months ending September 30, 2004. This represented an increase of $18.2 million, or 19.55%, over the net interest income of $93.2 million for the same period of 2003. This increase resulted from a $23.1 million increase in interest income, partially offset by a $4.9 million increase in interest expense. The increases in interest income were primarily due to the increase in average earnings assets.

 

Net interest margin (tax equivalent) for the third quarter of 2004 was 4.08%. This represents a slight increase when compared to the 3.95% for the third quarter of 2003.  Asset yields for the third quarter of 2004 were 5.26%, compared with asset yields of 5.01% for the third quarter of 2003.   The cost of funds was 1.73% and 1.58% for the same periods, respectively. 

 

Net interest margin (tax equivalent) for the first nine months declined from 4.17% for the first nine months of 2003 to 4.01% for the first nine months of 2004.  Asset yields have declined from 5.37% for the first nine months of 2003 to 5.15% for the first nine months of 2004.  This has been mitigated by the strong growth in the balance sheet, and the decline in the cost of funds from 1.80% to 1.68% for the same periods. The margin compression appears to be moderating with the recent stability of interest rates.  The Company has approximately $1.30 billion, or 45.45%, of its deposits in interest free demand deposits.  This should position it well for a rising interest rate environment.

 

Balance Sheet

The Company reported total assets of $4.35 billion at September 30, 2004. This represented an increase of $690.9 million, or 18.87%, over total assets of $3.66 billion on September 30, 2003. Earning assets totaling $4.08 billion were up $654.4 million, or 19.11%, when compared with earning assets of $3.42 billion as of September 30, 2003. Deposits of $2.87 billion grew $254.1 million, or 9.72%, from $2.61 billion for the prior year. Demand deposits of $1.30 billion jumped $183.4 million, or 16.37%, from $1.12 billion. Gross loans and leases of $2.01 billion on September 30, 2004 rose $380.1 million, or 23.32%, from $1.63 billion on September 30, 2003.

 

Total assets of $4.35 billion as of September 30, 2004 reflect an increase of $498.4 million, or 12.93%, over total assets of $3.85 billion on December 31, 2003.  Earning assets of $4.08 billion were up $436.2 million, or 11.97%, during the same period. Deposits of $2.87 billion on September 30, 2004 grew $207.4 million, or 7.80%, from $2.66 billion as of December 31, 2003.  Demand deposits of $1.30 billion were up $161.1 million, or 14.10%, from $1.14 billion. Gross loans and leases of $2.01 billion increased $249.9 million, or 14.20%, from $1.76 billion on December 31, 2003. Total equity of $310.1 million on September 30, 2004 was up $23.4 million, or 8.15%, from $286.7 million as of December 31, 2003.

 

Investment Securities

Investment securities totaled $2.04 billion as of September 30, 2004. This represents an increase of $172.5 million, or 9.25%, when compared with $1.87 billion in investment securities as of December 31, 2003. It represents an increase of $259.6 million, or 14.59%, when compared with the $1.78 billion for the third quarter of 2003.

 

Assets Under Administration

The Wealth Management Group has over $1.2 billion in assets under administration. They provide trust, investment and related services. 

 

Loan and Lease Quality

CVB Financial Corp reported non-performing assets of $689,000 as of September 30, 2004.  This represents a ratio of non-performing assets to total assets of 0.02%, and it represents 0.03% of gross loans and leases.  The allowance for loan and lease losses was $23.1 million as of September 30, 2004.  This represents 1.15% of gross loans and leases. It compares with an allowance for loan and lease losses of $23.8 million, or 1.46% of gross loans and leases on September 30, 2003.  Non-performing loans and leases represented 2.99% of the allowance for loan and lease losses. Non-performing assets decreased by $944,000 from the $1.6 million reported as of September 30, 2003.

 

The Company has not made a provision for loan and lease losses due to the high quality of its loan portfolio. This has been the case even though loans increased from $1.63 billion as of September 30, 2003 to $2.01 billion as of September 30, 2004. Recoveries of $3.5 million and the addition of $2.8 million from acquisitions more than offset charge offs of $2.5 million during this twelve-month period.

 

Corporate Overview

CVB Financial Corp. is the holding company for Citizens Business Bank. The Bank is the largest financial institution headquartered in the Inland Empire region of Southern California.  It serves 30 cities with 37 business financial centers in the Inland Empire, Los Angeles County, Orange County and the Central Valley areas of California. Its subsidiary, Golden West Financial Services, provides vehicle leasing, equipment leasing and real estate loan services. 

 

CVB Financial Corp. was recently recognized at the Annual Strategic Issues Summit with the “Market Cap” Award.  This Award was presented to recognize the Company for producing a return to its original shareholders of 41,034%--over 400 times the original investment.  This is the highest return in the history of the banking industry in California.  The Strategic Issues Summit is co-sponsored by Carpenter & Company and the California Bankers Association.

 

For the second year, the Company received the KBW Honor Roll award at the Annual Community Bank Investor Conference hosted by Keefe, Bruyette & Woods, Inc. in New York on July 27, 28 and 29, 2004. This award was presented to the 31 banks in the United States that have reported increased earnings per share every year for the past ten years.

 

Shares of CVB Financial Corp. common stock are listed on the NASDAQ under the ticker symbol of CVBF. For investor information on CVB Financial Corp., visit our Citizens Business Bank website at www.cbbank.com and click on the CVB Investor tab.

 

Safe Harbor

This document may contain forward-looking statements that are subject to risks and uncertainties that could cause actual results to differ materially from the projected.  For a discussion of factors that could cause actual results to differ, please see the publicly available Securities and Exchange Commission filings of CVB Financial Corp., including its Annual Report on Form 10-K for the year ended December 31, 2003, and particularly the discussion on risk factors within that document.

 

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